Cross-border high-speed broadband project 'cost £921,300 MORE than it should have'

Northern Ireland's auditor says Nortel racks were never used and the Enterprise Department lost £1.45million after EU withdrawal

Bytel aims to provide faster internet connections on both sides of the border (Photo: Library picture)

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Equipment for a cross-border high-speed broadband project was bought for £943,000 - using public funds when the true value was £21,700, Northern Ireland's auditor said.

The "virtually obsolete" Nortel racks were never used and Northern Ireland's Enterprise Department lost £1.45 million after the EU withdrew, according to the review.

The company behind the ambitious plan, Bytel, aimed to provide faster internet connections to homes in Belfast, Craigavon, Armagh, Dundalk and Dublin.

Comptroller and auditor general Kieran Donnelly said: "Bytel shows what can go wrong when projects like this are not handled properly.

"I have serious concerns over how it was managed and the legitimacy of the grant payments made.

"The response to whistleblowers fell well short of the standard required and a robust investigation took too long to complete."

Although ineligible for funding, €1.3million was given for equipment that was never used in the project, the review said.

The racks were bought by Bytel, a Belfast IT company, for €1.3million from a "related" company, the audit office said.

The report added: "Evidence suggests that this equipment cost 30,000 euro. The racks were never used for the project."

It said a whistleblower's concerns, which alerted Stormont's Enterprise Department to the true cost in 2008, were not brought to the attention of European funders until 2011.

The project, approved in 2004, was to be funded by the EU.

In the end Europe withdrew because of irregular expenditure and Northern Ireland's Department of Enterprise, Trade and Investment (DETI) lost two million euro of EU funding and the Republic's Department of Communications, Energy and Natural Resources lost £1.3 million, the audit office report said.

Bytel was paid grants worth £3.12 million. Its total actual costs were just under £2.9 million, the audit office said.

The auditor said the project narrowly passed the assessment for entry to the programme. A key element in its favour was a proposed partnership with Aurora Telecom.

The document said: "The strength of this relationship was not probed adequately."

Aurora withdrew shortly after funding had been granted and the project changed significantly, which the audit office said should have led to a recalculation of the grant but this did not happen and it was overpaid.